Contractor Wants Insurer to Pay for Skelos Subpoenas

MANHATTAN (CN) — Before going into business with disgraced New York State Senate Majority Leader Dean Skelos and his son, a contractor should make sure to enter into an airtight insurance policy — for the legal costs of a federal corruption investigation, that is.

On Monday, the Arizona-based fracking contractor AbTech sued the National Union Fire Insurance Company of Pittsburgh, Pa. to underwrite the $1.71 million bill it stacked up complying with federal subpoenas.

Last year, the U.S. Securities and Exchange Commission and the Department of Justice barraged AbTech with demands for information about how the senator badgered the company to give his son a job.

AbTech markets a sponge-like filter to remove pollutants from storm-water, a technology that is also useful in purifying the chemical-laced water in hydraulic fracturing, also known as fracking.

The younger Skelos helped AbTech land a contract to use the technology in Nassau County in the wake of Hurricane Sandy, and his senator father set up a meeting between the company and the Department of Health to push the state to allow fracking, prosecutors say.

The latter deal never came to pass because New York Gov. Andrew Cuomo later banned the controversial natural-gas drilling method as a menace to the environment.

All told, the younger Skelos made more than $300,000 for no-show work with AbTech and other companies that stood to benefit from his father's favors, according to prosecutors.

A federal jury convicted the Skeloses of bribery, extortion and conspiracy in December.

Authorities never accused AbTech of any wrongdoing, and the company now casts its role in the scandal as exactly the type of proceeding that its insurance policy contemplates.

In a 13-page complaint, AbTech quotes from passages of its policy covering a "civil, criminal, administrative or regulatory investigation." The lawsuit says that a subclause specifically includes "the case of an investigation by the SEC or a similar state or foreign government authority, after the service of a subpoena upon such insured person."

AbTech, which did not immediately respond to an emailed request for comment Tuesday, claims that National Union improperly denied coverage in June 2015.

It is represented by attorney Robin Cohen, from the Manhattan-based firm McKool Smith.

Meanwhile, a recent U.S. Supreme Court ruling wiping the federal corruption convictions of former Virginia Gov. Robert McDonell may have the Skelos family covered in a different sense.

Lawyers for the Skeloses have long argued that the Supreme Court's precedent in the McDonnell case could help their clients by creating a tougher standard for prosecutors to prove officials took an "official act" in return for a bribe.

Now that the high court ruled in McDonell's favor, lawyers for the Skelos family filed a motion on Tuesday urging the court to let their clients out on bail pending their appeal.

"This is a paradigm case for bail," appellate attorney Alexandra Shapiro from the firm Shapiro Arato LLP wrote. "It is undisputed that Dean and Adam Skelos pose no risk of flight or danger to the community. They are therefore entitled to bail if their appeals raise a 'substantial' question that could lead to reversal or a new trial. That standard is plainly satisfied here because of a change in the controlling law — an intervening Supreme Court decision which establishes that a key jury instruction was legally invalid."

The U.S. Attorney's office declined to comment on the motion, but it previously asserted that its case against the Skeloses can withstand the McDonnell precedent.

If their appeal fails, the elder Skelos will serve a five-year sentence, and his son faces six and a half years.

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